Tenure Won’t Guarantee Retirement: Here’s How

Financial Planning

For many university faculty, earning tenure is seen as the ultimate milestone—academic freedom, prestige, and institutional stability. However, what tenure doesn’t guarantee is a secure and comfortable retirement. With rising living costs, shifts in pension structures, and evolving economic uncertainties, tenure alone isn’t enough to ensure financial security in your emeritus years.

If you’re a scholar, whether early in your academic trajectory or approaching retirement, it’s essential to have a strategic financial plan beyond just relying on your university-sponsored pension. In this guide, we’ll break down why tenure isn’t a guaranteed financial safeguard and explore key steps faculty members can take to optimize retirement accounts, diversify income streams, and achieve long-term fiscal security.

🎓 Why Tenure Alone Won’t Secure Your Retirement

1. Pensions Are Evolving—and Not Always in Favor of Faculty

Many professors at public institutions rely on state pension systems such as TIAA-CREF, PERS, or STRS. While these defined benefit plans offer long-term payouts, they aren’t always sufficient, and in some cases, they are at risk of underfunding due to state budget reallocations.

Potential pension concerns include:

  • Many university pensions require long vesting periods before faculty qualify for full benefits.
  • Some states have already restructured pension payouts, impacting future retirees.
  • Inflation can erode the real value of pension disbursements over time.

2. Academic Salaries May Not Align with Long-Term Wealth Accumulation

Unlike corporate professionals who may experience rapid salary growth, many tenured faculty face salary compression or stagnation, limiting their ability to save aggressively for retirement. According to a 2023 report by the American Association of University Professors (AAUP), real wage growth for faculty has lagged behind inflation for over a decade. While full professors at research universities may earn six-figure salaries, many associate and assistant professors struggle with earnings that do not significantly increase over time. Additionally, the rising trend of contingent and adjunct faculty positions—with lower salaries and fewer benefits—has exacerbated long-term financial instability in academia. Unlike corporate professionals who may experience rapid salary growth, many tenured faculty face salary compression or stagnation, limiting their ability to save aggressively for retirement.

3. Healthcare Costs in Retirement Can Be Substantial

Even if your institution provides retiree healthcare benefits, out-of-pocket healthcare expenses will likely escalate over time. Medicare doesn’t cover everything, and long-term care costs can be significant burdens. According to a 2022 report by Fidelity Investments, the average 65-year-old couple retiring today can expect to spend approximately $315,000 on healthcare expenses throughout retirement. This includes premiums, copays, deductibles, and other medical costs not covered by Medicare. With healthcare costs rising annually, it is crucial for faculty members to plan ahead and allocate sufficient savings to cover these expenses. Even if your institution provides retiree healthcare benefits, out-of-pocket healthcare expenses will likely escalate over time. Medicare doesn’t cover everything, and long-term care costs can be significant burdens.

4. Inflation and Market Volatility Affect Retirement Portfolios

Inflation impacts everything from housing to healthcare to academic conference travel. Even a well-structured pension might not keep up with these rising costs, necessitating additional financial planning.

💰 How Professors Can Plan for a Secure Retirement

There are two primary ways to improve retirement income: saving more and spending less. Professors must take a balanced approach by increasing retirement contributions while managing expenses effectively. Below are the key steps to achieve financial security in retirement.

Step 1: Increase Your Savings with University Retirement Accounts and IRAs

Most institutions offer 403(b) and 457(b) plans, which function similarly to 401(k) plans in the private sector. Here’s how to leverage them effectively:

  • Contribute the Maximum: For 2024, the contribution limit is $23,000 (plus an additional $7,500 for those over 50).
  • Utilize Employer Matching Contributions: Many universities provide matching funds—ensure you capitalize on this benefit.
  • Consider an IRA: Opening a Traditional IRA or Roth IRA can provide tax advantages and additional savings flexibility beyond your university plan.

Step 2: Manage Your Income with a Budget

To ensure financial stability, professors should implement proactive budgeting strategies:

  • Track Expenses: Categorize academic and personal expenses to identify potential savings.
  • Limit Lifestyle Inflation: Avoid unnecessary spending increases when receiving tenure or pay raises.
  • Automate Savings: Set up automatic contributions to investment accounts to build wealth consistently.

Step 3: Develop Alternative Revenue Streams

In light of stagnant salaries and rising costs, professors should proactively seek additional income sources to bolster their retirement savings. Research from the Chronicle of Higher Education suggests that faculty members who develop external revenue streams—such as consulting, publishing, and teaching additional courses—can significantly improve their long-term financial security. Below are several viable options: Relying solely on a pension is precarious. Instead, cultivate multiple revenue sources while still engaged in academia:

1. Academic Consulting and Speaking Engagements

Leverage your scholarly expertise to engage in consulting opportunities, external grant writing, or paid keynote lectures.

2. Writing & Publishing

Transform your research into additional income through academic book contracts, journal royalties, or op-eds in reputable publications.

3. Online Courses & Academic Coaching

Platforms such as Teachable, Udemy, and Coursera allow faculty to monetize their subject matter expertise.

4. Teaching Additional Courses

Many institutions offer summer courses, online classes, or extra sections, which can provide supplementary income and boost retirement savings.

📈 Know How Much You’ll Need in Retirement and How Much to Withdraw

A crucial step in retirement planning is understanding how much you’ll need to withdraw annually to maintain your standard of living. The 4% rule, widely used in financial planning, suggests that retirees can withdraw 4% of their investment portfolio annually without significantly depleting their savings. For example: A crucial step in retirement planning is understanding how much you’ll need to withdraw annually to maintain your standard of living. The 4% rule is a simple calculation to estimate the savings required:

  • Determine Your Annual Expenses: If you need $60,000 per year in retirement, applying the 4% rule means you should aim to have at least $1.5 million in invested assets. This allows for a sustainable withdrawal rate while accounting for potential market fluctuations and longevity risk.
  • Factor in Pension & Social Security: If your pension provides $30,000 per year, your withdrawal requirement from investments decreases to $30,000, meaning you may need $750,000 saved.
  • Adjust for Inflation & Healthcare Costs: The 4% rule assumes a stable withdrawal rate, but retirees should also consider factors like rising medical expenses and cost-of-living increases. Many financial planners recommend periodically reassessing withdrawal rates to adapt to market performance and individual needs.

✅ Final Thoughts: Secure Your Financial Future Beyond Tenure

Tenure offers academic security, but it does not equate to guaranteed financial security in retirement. By strategically leveraging university-sponsored retirement plans, managing income effectively, diversifying revenue streams, and understanding withdrawal needs, faculty can create a financially independent future beyond their teaching and research careers.

🔹 Start early. Invest strategically. Build diversified income. Tenure is a privilege, but long-term financial security requires proactive planning.

📢 What’s your academic retirement strategy? Share your insights in the comments below!

Intermountain Wealth Management is a Registered Investment Adviser (RIA). The company manages several fee-based portfolios comprised of various equity and fixed-income investments that may include exchange traded funds (ETF’s), stocks and mutual funds. This is not a prospectus or an offer to sell any security.  Please read the prospectus of any investment before you invest. The information included here is intended for education and information purposes only.